“Diversity” is the most oversold management theory in America.Companies have invested untold billions in it, having argued themselves into believing it is a good investment.But “diversity” in the sense of racial and ethnic preferences in hiring and promotion and in the sense of a comprehensive marketing strategy is a financial sinkhole.It doesn’t deliver.

That leaves thousands of companies with a daunting problem.They can’t back out of “diversity” without risking boycotts, public defamation, and lawsuits.And the Supreme Court has just handed the diversiphiles a brand new cudgel.How long will it be before we have some experimental lawsuits testing whether the government’s “compelling interest” in “diversity” extends to making sure that publicly-traded companies are “diverse” from the shop floor to the board room?

Clearly what these companies need is a way to escape their foolish commitment to diversity without suffering undue financial and legal jeopardy.Enter the America’s diversity de-tox specialists.We don’t have a name yet.My friend suggested the “Phil Donahue Institute,” like the Betty Ford clinic—assuming we could cure poor old Phil.But I foresee a trademark problem there.

American companies spend about $8 billion each year on “diversity training,” some $400 to $600 million of which goes to “diversity consultants.”As we know from the many large companies that filed amicus briefs in the University of Michigan cases, the ritual refrain is that “diversity is a good investment.”But such evidence as we have strongly suggests the opposite.

That evidence comes from Thomas A. Kochan, a professor of management at MIT’s Sloan School of Management.A report by Fay Hansen in a recent issue of the business journal Workforce describes Professor Kochan’s five-year study of diversity programs at four large American corporations “with well-deserved reputations for their long-standing commitment to building a diverse workforce and managing diversity effectively.”The results?As Kochan puts it, “The diversity industry is built on sand…The business case rhetoric for diversity is simply naïve and overdone.”

The claims that a company’s commitment to “diversity” results in a more creative and more productive workforce just can’t be backed up.Kochan and his team of researchers from M.I.T., Harvard Business School, Wharton, Rutgers, and the University of Illinois ar Urbana-Champaign, approached over twenty Fortune 500 companies with long-standing diversity programs.They found that none of these companies had systematically collected data on the much touted bottom-line benefits of diversity.And only four of the companies were willing to participate in a study aimed at finding out what those benefits might be.

The four companies unafraid of finding out aren’t named in the study.They are identified simply as “a large information processing firm,” “a financial services firm,” another “information processing firm,” and “a large retail company.”The four companies were studied by different teams of researchers, but the results were pretty much the same.For the large information processing firm:

There were no significant direct effect of race or gender diversity on either team performance appraisal ratings or bonuses.

Racial diversity was negatively related to performance in business units with competitive organizational cultures, growth-oriented business strategies, and training-focused human resource practices…

For the financial services firm:

Across six separate performance measures and the overall performance index, we found only one significant direct effect of racial diversity on performance:racial diversity was positively associated with growth in branches’ business portfolios.

Team level gender and ethnic diversity were not significantly related to process outcomes such as team cooperation.

This study found no significant direct effects of racial or gender diversity on team performance but the results do reinforce the argument that organizational context matters.

And for the large retail company:

Contrary to theories of customer discrimination, communities with more whites, blacks, Hispanics or Asians did not buy more from stores with similar employees.

Racial diversity has little effect on sales due to…offsetting effects.

We found no consistent evidence that most customers care whether the salespeople who serve them are of the same race or gender.

And that’s it.In fact, Kochan and his team scoured the professional literature looking for other hard evidence and found only more doubts.In the cautious language of their report:“The empirical literature does not support the simple notion that more diverse groups, teams, or business units necessarily perform better, feel more committed to their organizations, or experience higher levels of satisfaction.”

So maybe diversity programs don’t deliver to the bottom line.Perhaps they are financially wasteful but otherwise harmless?Seemingly not.Although Kochan steers around the topic, it appears that aggregate increased commitment to diversity by companies does correlate powerfully with a couple things—namely increased charges of racial harassment and law suits.

According to Workforce reporter Hansen, “the number of job-discrimination charges filed with the Equal Employment opportunity Commission, including race-based charges, hit a seven-year high in 2002.”And “charges of racial harassment filed with the EEOC have increased fivefold in the past decade.”

Are these numbers evidence of a new epidemic of workplace harassment and discrimination?Somehow that seems unlikely.More likely, the rise in claims reflects the atmosphere of tension, hostility, and resentment that the ideology of diversity itself creates.In the workplace, as in every other context of American life, people want to be treated fairly, as individuals, not as representative data points in someone else’s scheme of demographic balance.But treat people as “diversity” units and, yes, they will eventually live down to your expectations.

Hansen’s eye-opening article also quotes Michael C. Hyter, president and CEO of J. Howard & Associates, a diversity consultant based in Boston.The view from inside the industry?Says Hyter, “Five or ten years from now, there are only going to be a few serious practitioners left—those who have demonstrated the ability to help organizations with measurable results.”

Hansen also reports the scoffing of the other side.Luke Visconti, a partner in DiversityInc, for example, rejects Kochan’s finding.“It defies gravity and flies in the face of logic.”

Well, I reject gravity too.I am not, of course, going to give away all my trade secrets, but watch this space for further thoughts on how corporate America can extricate itself from this mess.To the business execs who, judging it prudent, signed those amicus briefs:Don’t be embarrassed to call.We all have problems now and then.The important thing is to know when you need help.When you’re ready to take that first step, we’re here.

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